According to the joint initiative of the Ministries of Finance and Absorption, immigrants who purchase a home in Israel will be exempt from Purchase Tax on the first NIS 2 million and will pay a lower tax of 0.5% up to NIS 2.5 million, compared to 3.5%-5% paid by Israelis in this bracket. The rationale is to “compensate” immigrants for the cancellation of the exemption from reporting income and assets abroad and to encourage foreign residents to purchase real estate in Israel.
A new initiative currently being formulated by the Ministries of Finance and Integration seeks to make it easier for immigrants and returning residents to purchase an apartment in Israel and perhaps, at the same time, to stimulate the housing market, which has experienced almost a year and a half of slowdown and a low level of transactions.
According to the proposal, the details of which were revealed this week by the economic newspaper Globes immigrants and returning residents to Israel will enjoy a full exemption on purchase tax up to NIS 2 million of the purchase price, and will pay tax at a rate of 0.5% on the amount between NIS 2 million and NIS 2.5 million.
The tax rates to be paid on the portion exceeding NIS 2.5 million have not yet been published, and may not yet have even been decided since this is an initiative that is still being formulated. Nevertheless, these will be lower rates than those paid by Israelis who purchase a single apartment, who are exempt from tax when purchasing an apartment for up to NIS 1.98 million, and are charged 3.5% tax up to NIS 2.34 million of the purchase price, and 5% tax up to NIS 6 million of the price. Therefore, the benefit may reach tens of thousands of shekels in tax savings for new immigrants and returning residents.
However, according to the reports, the benefit will not apply to luxury properties, and for a purchase amount over NIS 6 million, buyers will pay according to the usual tax brackets.
From a conversation between Buyitinisrael and one of the parties involved in the matter, the benefit will apply as long as it is the buyer’s only apartment in Israel, regardless of whether he owns additional properties abroad. In any case, the details of the initiative have not yet been finalized, and are expected to be published only in about two or three weeks.
The main reason for deciding on the new benefit is to compensate for the cancellation of the exemption granted to new immigrants and returning residents from reporting income and assets abroad. In February, the Ministry of Finance published a memorandum of law canceling the exemption that has existed since 2008, under pressure from the OECD, which accused Israel of aiding tax evasion and threatened economic sanctions if the exemption was not revoked.
Non-resident purchase figures remain low
At the same time, there is an expectation of a significant wave of immigration to Israel in 2024, which will lead to a large number of property purchases, which may be in parallel to the implementation of the Aliyah process or even as a preliminary step. This is due to the increase in anti-Semitism in Western Europe and North America.
Earlier this week, over 600 prospective immigrants, participated at the Nefesh B’Nefesh Aliyah Fair in New Jersey where they met with Aliyah advisors, government representatives, and a variety of vendors.
However, as of today, expectations of home purchases by foreign residents are far from being realized. According to Ministry of Finance data published this week, in January 2024, foreign residents purchased only 112 apartments in Israel – 25% less than in January last year. It’s possible that as long as the war continues, potential home buyers are suspending their decisions on the issue.
